Robert Pollin, renowned Professor of Economics and co-director of the Political Economy Research Institute at UMass-Amherst, and author of the new book Back to Full Employment, has published a new piece (excerpted below) addressing why austerity is bad for the US economy, and why there is in fact no US debt crisis:
"Amid the wreckage of the 2008-09 Wall Street collapse and Great Recession, orthodox economists and political elites in both the United States and Western Europe have been strongly and consistently pushing the idea that the only way out of the mess is to deliberately make life worse for almost everybody. Details aside, this is the basic idea behind the austerity agenda that has become the conventional wisdom in both the U.S. and Europe, regardless of which political parties happen to hold office. It is the underlying premise for both the Democratic and Republican sides of the current debate over sequestration—i.e., imposing across-the-board cuts on social spending and defense, starting this coming Friday.

"Thus, despite Barack Obama’s reelection in November, the inside-the-beltway Democrats, including Obama, continue to appear committed to reaching common ground with Republicans over a bipartisan austerity agenda that would entail significant cuts in Medicare, Social Security and public spending on education and public services. To be sure, the Obama austerity agenda is softer than the hard-right approach favored by Republicans. But the Republicans continue to frame the D.C.
debate around proposals to gut Medicare, Social Security, and public schools.

"The situation is still worse throughout Europe, where the dominant elite view is that the European welfare state is no longer affordable. Public employment, health care budgets, and pensions are being slashed, while poverty is rising dramatically. For example, The New York Times reported that 22 percent of Spanish households are living in poverty and that 600,000 have no income whatsoever. As The Times noted, 'For a growing number, the food in garbage bins helps make ends meet.'

"But such human suffering aside, could the austerity hawks be correct that there is simply no alternative to forcing this bitter medicine down people’s throats now? The basis for the austerity hawks’ claim is that both the U.S. and European economies are being consumed by out-of-control levels of public indebtedness. Public spending must therefore be slashed before total economic collapse becomes a real possibility.

"In fact, however, austerity hawks’ claims are wrong across the board: the public debt burden in the U.S. is actually at a near-historical low level, not a high; in Europe, where government debt burdens are severe, there are still clear alternatives for managing the problem that do not entail a crushing austerity agenda; and finally, the austerity agenda actually solves nothing. Making life worse now for most people now also makes it more difficult to pull the economy out of the
ditch into which Wall Street has shoved it. What then is behind the austerity agenda?"

The U.S. Case: There is No Government Debt Crisis

"Both U.S. government deficits—how much the government is borrowing each year—and government debt—how much the government owes overall—did rise sharply as a result of the Great Recession. This occurred because economic policymakers enacted extraordinary measures to counteract the crisis created by Wall Street. These included financial bailouts; monetary policies that pushed central-bank-controlled interest rates close to zero; and large-scale fiscal stimulus
programs, financed by major expansion in central government fiscal deficits…"